New Corporate Transparency Act: Does Your Business Need to Take Action?

The Corporate Transparency Act (CTA) will soon require millions of businesses to report ownership information to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

Who must report?

A “reporting company” is outlined by the CTA and generally includes any corporation, LLC, or other similar entity created by filing a document with a secretary of state or similar office in the US or registered to do business in the US.

There are several exemptions, such as for businesses that are large or in heavily regulated industries. In particular, a company is exempt if it has more than 20 full-time employees in the US, reported more than $5 million in gross receipts or sales, and operates a physical office within the US.

This means that many small businesses will be impacted by the new law.

What needs to be reported?

Specifically, “reporting companies” must provide FinCEN with information about individuals who are (1) the “beneficial owners” and (2) “company applicants” who filed an application to create the entity or register it to do business. The information will include details such as birthdays, addresses, and images of government identification. Companies must also report business names and any fictitious business names, addresses, jurisdiction of formation or registration, and taxpayer identification number.

FinCEN will use this data in a national registry to provide information to authorized users, such as law enforcement and financial institutions. A goal is to increase transparency about the identities of business owners and controllers to prevent, among other things, crimes such as money laundering.

When should reporting start?

FinCEN will begin accepting reports electronically on January 1, 2024.

All reporting companies created or registered before that date are required to report by January 1, 2025. Reporting companies created or registered on or after January 1, 2024, must report within a certain number of days of creation.

What should be done now?

Companies need to review whether reporting is required for their business and, if so, what information to report. Given the CTA’s definitions and details, working with experienced counsel may be key, especially for businesses operating multiple companies that fall under the law.

Proactive compliance is key. Although many are not yet aware of the law, non-compliance carries steep fines and potential for imprisonment.

How Can KR Law Help?

If you fall under these guidelines and don't know where to start, please call us at 415-955-1155, ext. 120, or submit your matter online.